By: Michael D. DeMeola, Esq.
Early in the morning of January 19, 2011, Mr. Visentin notified IBM that he was leaving the company to work for a major competitor- Hewlett-Packard. Just one day later, he found himself the subject of a lawsuit. On January 20, 2011, in an effort to enforce the parties’ noncompetition agreement, IBM filed suit against Mr. Visentin, a former executive, in the United States District Court for the Southern District of New York, claiming breach of contract and misappropriation of trade secrets. On January 24, 2011, the Court issued a temporary restraining order, and scheduled the case for a preliminary injunction hearing. Within five days of providing IBM with notice of his departure, Mr. Visentin was effectively without a job, precluded- at least temporarily- from engaging in his newly secured position. This case demonstrates not only the force, speed and agility of a large corporation’s legal team, but perhaps more importantly, illustrates the effectiveness of a quickly orchestrated and well-executed legal defense.
Prior to his resignation, Mr. Visentin worked for IBM in various capacities for twenty-six years. In 2006, he became a Global Vice President in the company’s Integrated Technology Services Group (ITS). Then, in September, 2007, he became General Manager of the ITS business. Responsible for providing its clients with various technology services, including services to improve data storage and recovery capabilities, protect networks from viruses, and implement data security systems, this segment generates approximately five thousand to nine thousand deals per quarter, and total revenue of $2.5 billion annually. In December, 2008, Mr. Visentin was appointed to IBM’s Integration and Value Team, a leadership group that develops IBM’s corporate strategy. Although there were technical aspects of Mr. Visentin’s various positions, after hearing four days of testimony, the Court found that he was a business manager, not a technical expert.
As part of his employment with IBM, Mr. Visentin signed two noncompetition agreements, the first on July 16, 2008 and the second on July 29, 2009. The July 29th agreement essentially provided that during his employment with IBM, and for 12 months thereafter, he would not directly or indirectly engage in or associate with any competitors of the company. Mr. Visentin also agreed to a restrictive covenant precluding him from soliciting IBM clients for a period of one year, and IBM employees for a period of two years.
IBM’s first argument was that if Mr. Visentin were allowed to work for HP, IBM would be irreparably harmed because Mr. Visentin’s new position posed the risk that he would inevitably disclose confidential IBM information. IBM argued that Mr. Visentin possessed a plethora of confidential information including strategic business and marketing plans, “strategic initiative,” new service offerings, acquisition plans, the operational finances of the ITS business, IBM’s competitive business and pricing strategies, the identity of new client targets, the identify of troubled clients, and IBM’s competitive strategies to attack HP.
In denying IBM’s application for an injunction, the Court first noted that a preliminary injunction is “an extraordinary and drastic remedy which should not be routinely granted.” Med. Soc’y of State of N.Y. v. Toia, 560 F.2d 535, 538 (2nd Cir. 1977). Indeed, to obtain a preliminary injunction, the moving party must demonstrate, first, that it will be irreparably harmed if an injunction is not granted, and, second, either a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation, as well as a balance of the hardships tipping decidedly in its favor. Lusk v. Vill. Of Cold Spring, 475 F.3d 480, 485 (2nd Cir. 2007). To show that it will be irreparably harmed, a movant bears the burden of demonstrating that absent an injunction, it will suffer an injury that is neither remote nor speculative, but rather actual and imminent, and one that cannot be redressed through a monetary award. Payment Alliance Int’l, Inc. v. Ferreira, 530 F. Supp. 2d 477, 480 (S.D.N.Y. 2007).
Next, the Court explained that in New York, properly scoped noncompetition agreements are enforceable to protect an employer’s legitimate interests so long as they pose no undue hardship on the employee and do not militate against public policy. BDO Seidman v. Hirshber, 712 N.E. 2d 1220, 1223 (N.Y. 1999). The Court further explained that trade secrets and confidential information are considered legitimate interests; however, only that confidential information or those trade secrets that the employee misappropriates or will inevitably disclose are protectable. Reed, Roberts Assocs., Inc. v. Strauman, 353 N.E. 2d 590, 593 (N.Y. 1976).
In ruling in Mr. Visentin’s favor, the Court noted that his primary job at IBM was to be a general manager, explaining, “[a]lthough trade secrets may have lurked somewhere on the periphery, the real thrust of his position was to manage his teams to make them as efficient as possible.” The Court relied on Mr. Visentin’s testimony that he had never taken a computer science course and considered himself a generalist. Mr. Visentin testified, “I am not technical, I don’t know the details of offerings, I’m more of a general manager and I run a business.”
The Court also relied on the testimony of Mr. Visentin’s new manager at HP, who confirmed that Mr. Visentin’s generalist qualities were the driving factor behind his hiring. Mr. Visentin’s future manager testified that he hired Mr. Visentin because, “he had good general IT services knowledge [and] broad experience,” and that Mr. Visentin struck him, “as a process-oriented thinker, a guy who could sort of connect the dots, if you will, of the overall responsibilities of the job.” He also testified that Mr. Visentin’s job would not include involvement in technical services, but rather would be to “manage people.”
Although IBM identified numerous types of information potentially in Mr. Visentin’s possession which it argued should be afforded protection, the court noted that much of the information is either applicable to all large corporations, in the public domain, or outdated, and, thus, does not constitute “trade secrets.” The court also explained that simply showing Mr. Visentin had access to some confidential information does not sufficiently demonstrate irreparable harm. IBM failed to provide specific examples of confidential or trade secret information that could actually be used to its detriment if Mr. Visentin were allowed to assume his new position at HP. The Court further held that IBM failed to demonstrate Mr. Visentin’s position at HP would require him to disclose any confidential IBM information he might remember.
Attorney DeMeola is an associate in Maya Murphy, P.C.’s Litigation Department, practicing primarily in the areas of Labor/Employment Law and Civil Litigation. He can be reached by telephone in the Firm’s Westport office at (203) 221-3100 or by e-mail at email@example.com.